IVG Seeks Investor in London’s Gherkin Tower to Reduce Debt

March 20 (Bloomberg) -- IVG Immobilien AG is seeking an
investor in the fund that owns half of the London tower known as
the Gherkin after the lenders demanded that it reduce debt used
to finance the building’s purchase.

IVG’s Euroselect 14 fund is exploring the sale of shares in
the property at 30 St. Mary Axe, Oliver Stumm, a spokesman at
Bonn-based IVG, said by phone. He didn’t disclose the amount.
IVG last week won approval from the fund’s investors to convert
a Swiss-franc loan secured against the building into one
denominated in pounds, fulfilling another demand by its lenders,
he said.

Office buildings in the City of London financial district
lost about 45 percent of their value in the two years through
September 2009 and were about 25 percent off their peak through
the third quarter of last year, according to Investment Property
Databank. That puts pressure on owners that borrowed against
properties at the top of the market.

IVG and Evans Randall Ltd. bought the Gherkin from
insurance group Swiss Re Ltd. for about 600 million pounds ($902
million) in 2007. The building was valued at 473 million pounds
to 510 million pounds last year, according to IVG’s website.
Part of the fund’s loan was in francs and the Swiss currency’s
65 percent increase against the pound over the last six years
caused a breach in its loan-to-value threshold for the tower, it
said.

Banks Wait

“The bank consortium is willing to forgo its right to
extraordinary termination for another nine months,” Stumm said
by e-mail.

Bayerische Landesbank and its Real I.S. AG unit provided
the financing for the Gherkin’s purchase, according to the
German bank’s 2007 annual report.

The aim of the share sale would be to bring the building’s
loan-to-value ratio closer to the 67 percent required by the
loan covenant, Stumm said.

“We have no current plan to increase our stake in the
Gherkin,” Kent Gardner, chief executive officer of Evans
Randall, said in an interview at the MIPIM property conference
in Cannes last week. “It’s actually a long-term financing. The
building itself is performing very well.”

More Investment

Investments in the City of London and Canary Wharf
financial districts reached 9.4 billion pounds in 2012, the most
in five years, broker Cushman & Wakefield Inc. said in February.
Yields, annual rent expressed as a percentage of the purchase
price, amounted to 5 percent in the fourth quarter, unchanged
from the previous three months.

British Land sold Ropemaker Place to clients of Axa Real
Estate for 472 million pounds, the equivalent of a 5 percent
yield, in the third-largest deal in the City of London in five
years, it said last week.

Euroselect 14 investors were told last September that they
may have to put an additional 75 million pounds into the IVG
fund because of the franc’s appreciation, the London-based Times
reported at the time.

IVG manages about 21.4 billion euros of assets including
3.3 billion euros of offices, according to the company’s
website. It also builds and operates underground caverns for oil
and gas storage in northern Germany. The shares have dropped
about 31 percent in the last 12 months.